Jump to content

Cafeteria plan (FSA) - separate checking account


Spencer
 Share

Recommended Posts

Under ERISA Employee Contributions to a cafeteria plan are plan assets just like 401k deferrals.  As plan assets these deferrals need to be held in a Trust.  However the DOL has issued a nonenforcement policy of the Trust Requirement in Technical Release 92-01.  To take advantage of this nonenforcement policy the employee cafeteria plan contributions should remain in the general assets of the employer.  To set them apart in a separate checking account creates the impression of creating a separate fund to pay plan benefits and would lose the nonenforcement exception and require setting up a trust. 

As a side note, creating a cafeteria plan is more than just a checking account to pay benefits.  You need a plan document and the plan must meet nondiscrimination requirements.  In many ways it is  just like a 401k except you paying health and dependent care claims.  Another wrinkle is that these plans are subject to HIPPA, COBRA and the Affordable Care Act.

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...